In the first quarter of 2024, venture capital (VC) funding in the crypto space experienced a surge, breaking a two-year downtrend. Data from crypto analysis platform Crypto Koryo shows a 38% increase in the total amount invested and a 49% increase in the number of projects receiving VC funding compared to the previous quarter. This renewed investor confidence in the crypto industry has led to predictions of a new wave of investments, similar to what was observed in Q4 2020. Prominent crypto-native VCs such as Andreessen Horowitz Crypto, OKX Ventures, Multicoin Capital, Paradigm, and Polychain have emerged as dominant players in the funds invested during the quarter.
In March alone, crypto VC funds allocated over $1.1 billion across 180 investments, reflecting a 52.5% month-on-month increase in VC funding for crypto projects. The focus has been particularly on infrastructure and decentralized finance. This upswing in funding during Q1 2024 follows the positive momentum seen in Q4 2023, which marked the first rise in VC investments for crypto projects since March 2022. The crypto industry faced challenges in 2022, with a decline in venture capital funding due to lackluster market conditions and consecutive quarterly drops in investments.
Balance, a digital asset custodian based in Canada, has achieved $2 billion in assets under custody (AUC) amid the recent recovery in crypto markets. Korea Digital Asset (KODA), the largest institutional crypto custody service in South Korea, has also seen significant growth in assets under its custody. Through partnerships with major Korean bank KB Bank, crypto venture capital firm Hashed, and blockchain tech firm Haechi Labs, KODA’s assets reached 8 trillion Korean won ($6 billion) by the end of 2023, a substantial increase from the 2.3 trillion won recorded in June 2023. Analysts at Bernstein Research predict that crypto funds could reach $500 billion to $650 billion within the next five years, a significant leap from the current valuation of approximately $50 billion.
The positive trend in crypto VC funding could signify a shift towards more investments in the sector. Comparisons have been drawn between the recent uptick in funding and patterns observed in Q4 2020, which preceded a massive influx of VC investments into the crypto industry. This quarter witnessed increased interest from crypto-focused venture firms, with a shift away from banks and non-crypto VCs dominating investments in previous periods. The involvement of prominent crypto-native VCs such as Andreessen Horowitz Crypto, OKX Ventures, Multicoin Capital, Paradigm, and Polychain suggests a growing confidence in the potential of crypto projects.
Overall, the surge in VC funding for crypto projects in Q1 2024 marks a positive turn for the industry after facing challenges in 2022. With significant increases in both the total amount invested and the number of projects receiving funding, there is renewed investor confidence in the potential of crypto projects. The growth in assets under custody for companies like Balance and KODA further indicates the increasing interest and value of crypto assets. Analysts predict a significant increase in the valuation of crypto funds in the coming years, highlighting the potential for further growth and development in the crypto industry.
